Squid Game Helps Raise Netflix Stock Price (NFLX Stock)

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Despite disappointing user growth expectations in July for the third quarter, Netflix’s share price, after initially falling, spent the remainder of the last quarter reversing those losses and hitting new records earlier this month- ci, so expectations for tonight’s quarterly numbers were already high.

Netflix is ​​under attack on several fronts in the highly competitive streaming market, but still remains the market leader in streaming content despite Disney +, Apple TV +, Warner Media / Discovery and Amazon who recently added the MGM catalog, for its offering. Premium.

While its US market is roughly saturated and subject to some churn, globally Netflix remains in the lead with over 210 million subscribers and is holding up very well.

This despite its worst start to the year for subscriber growth since 2016, while lowering its expectations for the third quarter did not help.

Third-quarter subscriber estimates were revised down in July from 5.86 million to 3.5 million, which was the main factor behind the drop in the stock price in the era.

Last night’s improvement to 4.4 million suggested management was slightly too pessimistic about it, but they likely didn’t capitalize on the success of Squid Game, which helped push the numbers up by half. of these new subscribers coming from the APAC region.

On the income front, the picture continues to be positive, in line with expectations at $ 7.48 billion, while profits exceeded expectations at C $ 3.19.

Estimates for the fourth quarter indicated further improvements in revenue with an estimate of $ 7.7 billion, while profits are expected to fall back to C $ 0.80, due to higher content spending and profit margins. weaker operations, which are expected to fall 23.5% in the third quarter. at 6.5% in Q4.

The decline in fourth quarter earnings was disappointing and below the consensus of C $ 1.10.

Operating margins for the full year are still expected to be 20% or slightly better, despite higher expenses in the fourth quarter.

As improvements on the revenue front show Netflix is ​​proving to be effective in keeping cash flow stable, it seems increasingly likely that any ambition to break even this year may well be pushed back to 2022, 2021. to see the company achieve balance.

It is becoming increasingly clear that if revenues continue to rise, Netflix is ​​feeling the heat of growing competition from its peers. So far, it has been able to pass price increases and further expand its user base, with most new subscribers coming from the APAC region, with the company expecting to add 8.5 million. new subscribers during its last quarter.

For Q4, Netflix plans to release a number of returning series, including The Witcher, Cobra Kai, and Tiger King, while viewers are still looking forward to new seasons for Stranger Things and Lost in Space.

As Netflix increasingly focuses on its international markets, it seems unlikely that revenues will slow down and the potential for user growth, especially in international markets, still looks pretty decent, even by the numbers. growth in the number of subscribers in 2019.

With the addition of video games streaming to mobile devices and the recent acquisition of the Roald Dahl company, the potential of management to grow and diversify the business to a younger cohort, as well as existing users may not. harm either.


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